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U.S. Gas Demand

Expectations for U.S. gas market growth have been lowered over the last decade as a consequence of persistent market price volatility, as well as underlying changes in the economy.  The National Petroleum Council in 1999 predicted the U.S. would consume 30 Tcf of natural gas by 2010.  Instead, U.S. gas demand in 2009, at 22.7 Tcf, was lower than at the start of the decade, lead by declines in industrial gas demand.  Government forecasters at the U.S. Energy Information Administration no longer anticipates a 30 Tcf market in the foreseeable future, predicting in the 2010 Annual Energy Outlook that U.S. gas demand would total 24.9 Tcf by 2035.

U.S. Energy Outlook
us gas demand

Structural factors have contributed to these more conservative estimates of future demand growth.  The composition of U.S. economic activity has gravitated toward less energy-dependent activities such as services and health care, at the expense of manufacturing-based activity.  Furthermore, improved technology and efficiency standards have lead to sharp reductions in energy usage in consumer products that directly, or through reduced electricity usage, indirectly impact U.S. natural gas consumption.  New combined-cycle natural gas power plants also consume much less natural gas than their older steam-based counterparts.  Consequently, electricity output from domestic gas-fired power plants over the last decade has been expanding at approximately twice the rate of growth in demand for natural gas to fuel those units.

Other sectors of the domestic economy have experienced structural changes that have dampened the potential for future growth in natural gas consumption. The EIA has documented that gas demand per U.S. residential household has been in decline since the 1990s, down 22% on a weather-adjusted basis from 1990 to 2009, due to efficiency gains in heating furnaces, improvements in insulation and building construction codes, population shift towards warmer regions, and higher commodity prices.  The EIA is forecasting effectively no growth in future residential sector consumption of natural gas as customer growth is offset by efficiency gains. The result of these trends is that meeting the future economic needs of the U.S. economy will require relatively less natural gas, and energy in general, than in the past.